This paper deals about the simple cause and effect relation between growth and poverty which

may be called the growthpoverty nexus. There can be little doubt that these two phenomena are very closely connected. By raising the level of personal incomes of the poor and by expanding the resource base of social provisioning, sustained economic growth must have laid the foundations on which the impressive record of poverty reduction of the past half century has been achieved. The paper goes on to argue, however, that the mere existence of a positive growthpoverty nexus does not imply that maximizing the rate of growth is always the right strategy for maximizing the rate of poverty reduction. While recognizing the importance of growth for poverty reduction, there still remains the question of what kinds of growth strategy are best suited to poverty reduction. Three different growth strategies are evaluated in terms of their potential for poverty reduction: the strategy of outward-oriented trade and industrial development, the strategy of agriculture-led growth, and redistributive reform as a growth strategy. Actually, Kuznets hypothesis gave birth to the notion that barring fundamental socioeconomic changes, the process of economic growth will tend to tilt income distribution in favor of the rich, leaving little benefit for the poor. Kuznets hypothesis claimed that as per capita national income rises from low initial levels, inequality first rises and then falls, giving rise to an inverted U-shaped relationship between income and inequality. This hypothesis was based on highly questionable distribution data and the distribution data was also not in congruence with the national income data across different countries. As a consequence, the current wisdom regarding the Kuznets hypothesis is that it can be dismissed for all practical purposes.

However, there is another version of Kuznets hypothesis, which relates inequality to the rate of growth of income, i.e., inequality is supposed to go up as the rate of growth of income goes up. But even this version finds little empirical support. These findings undermine the skeptical view on the relationship between growth and poverty, for if growth does not tend to create a more unequal distribution of income than in general there is no reason to suspect that it will fail to reduce poverty. Empirical findings suggest that rising per capita income will generally lead to lower poverty, especially if the rate of growth is sustained at a reasonably high rate, which on current evidence would mean not less than 2-3 percent per annum. It was also found that when alternative poverty lines were used to measure the incidence of poverty, the estimated growth elasticity was higher for lower poverty lines. The implication is that the incidence of extreme poverty was even more responsive to growth in average living standards than the incidence of moderate poverty. The implication typically drawn from these findings is that faster growth will reduce poverty faster, which is just another way of saying that maximizing the rate of growth is equivalent to maximizing the reduction of poverty, in other words, there is apparently no tradeoff between growth and poverty reduction.